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Fincash » Mutual Funds » Ultra Short Term Mutual Funds

Ultra Short Term Bond Funds

Updated on February 1, 2023 , 6324 views

Ultra short term funds, earlier referred as Liquid Plus Funds, are funds that invest in debt instruments having residual maturities of more than 91 days and typically less than 1 year(in some cases they may go upto 1.5 years). Ultra Short Term Funds are short term investments that are highly suitable for investors who are willing to marginally increase the risk of investment to earn good returns. Essentially, Ultra short Funds invest in money market securities and other debt instruments of short maturities, however, the average Portfolio maturity of these funds is generally little higher than that of Liquid Funds.

Ultra SHort Term Bond Fund

Also known as Cash or Treasury Management Funds, Ultra Short Term Funds generally offer good returns that other types of Debt fund (like Liquid Mutual Funds).

Ultra Short Term Bond Funds Features

Fund Type

Ultra-Short Term Funds are open-ended and the maturity period of funds varies from fund to fund. The maturity is very short(usually a couple of months) but longer than that of liquid funds. The investors can easily buy and sell the units of these funds as per the NAV (Net Asset Value) of the Redemption day.

For Ultra Short Term Funds, the purchase happens on a (T+0) Basis. This means that the NAV is fixed on the same day as the funds reach the AMC. For e.g. for an investor purchasing the fund within the cut-off time on a Tuesday (and funds being realised), the NAV date applicable would be Tuesday itself.

Exit Load of Ultra Short Term Bond Funds

Some Ultra Short Term Funds may have exit loads on exits made within very short periods of time (ranging from 7 days to 1 month). The period till which exit load applies may vary with funds. However, some ultra short terms funds do not have any exit loads also.

Returns of Ultra Short Term Funds

The returns may be paid to the investors in the form of Dividends (in the case of Dividend Funds) or in terms of appreciation of the fund NAV (in the case of Growth funds).

Redemption Ultra Short Term Funds

In the case of redemption, the process is the same for both liquid funds and Ultra Short Term Funds. For all redemption requests received by the AMC within the cut-off time (3 PM), the proceeds are paid to the customer the next day i.e. on a (T+1) basis. Albeit, if the request gets registered after 3 PM, the investors shall receive the redemption amount day after.

Minimum Amount of Investment

The minimum of Investing in Ultra Short Term Funds is INR 5,000 to 10,000 (on the retail plans).

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Investment Avenues of Ultra Short Mutual Funds

Ultra Short Term Funds are fixed Income investments that invest in money Market instruments like Treasury Bills but these may be 91-Day, 182-Day or 360-Day Treasury Bills. They can also invest in CDs and CPs having residual maturities longer than 91 days. Moreover, it is sometimes understood that there is no credit risk in such portfolios. However, this is not the case. Any short term investment like Ultra Short Funds can give a negative return as well if there is a Default. But, most companies delay payments on longer-dated Bonds before they start defaulting on short term debt (since this would lead a freeze in short term credit). Also, the investors need to carefully look at the portfolio in these funds to assess the quality of instruments and be ready to take that risk.

Why Invest in Best Ultra Short Term Funds?

Typically, the yield on a debt instrument is higher for instruments with longer maturities. Think of it as a way to reward the extra risk that investors take to be invested in the instruments for a longer period of time. In finance, this is called the liquidity premium Theory. Thus, securities in Ultra Short Mutual Funds usually earn a higher yield as compared to Liquid funds (albeit at a relatively higher risk). As a result, Ultra Short Term Funds may give marginally better returns than Liquid funds over comparable periods of time. So, make a sensible short-term investment in Mutual Funds by investing in Best Ultra Short term Mutual Funds to earn good returns with less Volatility.

Taxation of Ultra Short Term Funds

In the below table, the returns of Ultra Short Bond Funds received in the form of a dividend are tax-free in the hands of investors.

However, a Dividend Distribution Tax (DDT) is deducted at the source by fund houses, which is 25% in case of Debt Funds like Ultra Short Term Funds.

Liquid Funds Liquid Funds Ultra Short Funds Ultra Short Funds
Class of Investors Individuals/HUF Corporate Individuals/HUF Corporate
Dividend Distribution Tax 27.038% 32.445% 13. 519% 32.445%
Short Term Capital Gains As per income tax Slab Rates As per Income Tax Slab Rates As per Income Tax Slab Rates As per Income Tax Slab Rates

(Please note, investors are advised to consult their Tax consultant before taking any decisions)

Best Performing Ultra Short Debt Funds to Invest FY 23 - 24

Below is the list of top funds have net assets over 100 Crore and managing assets for atleast 3 years.

FundNAVNet Assets (Cr)1 MO (%)3 MO (%)6 MO (%)1 YR (%)3 YR (%)5 YR (%)
Franklin India Ultra Short Bond Fund - Super Institutional Plan Growth ₹34.9131
↑ 0.04
₹2970.61.35.913.78.88.7
Aditya Birla Sun Life Savings Fund Growth ₹458.975
↑ 0.09
₹14,9480.51.72.955.26.4
IDBI Ultra Short Term Fund Growth ₹2,348.76
↑ 0.57
₹2050.51.634.84.55.5
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 7 Aug 22

1. Franklin India Ultra Short Bond Fund - Super Institutional Plan

To provide a combination of regular income and high liquidity by investing primarily in a mix of short term debt and money market instruments.

Franklin India Ultra Short Bond Fund - Super Institutional Plan is a Debt - Ultrashort Bond fund was launched on 18 Dec 07. It is a fund with Moderate risk and has given a CAGR/Annualized return of 8.9% since its launch. , 2021 was 11.9% and 2020 was 4% .

Below is the key information for Franklin India Ultra Short Bond Fund - Super Institutional Plan

Franklin India Ultra Short Bond Fund - Super Institutional Plan
Growth
Launch Date 18 Dec 07
NAV (07 Aug 22) ₹34.9131 ↑ 0.04   (0.11 %)
Net Assets (Cr) ₹297 on 31 Jul 22
Category Debt - Ultrashort Bond
AMC Franklin Templeton Asst Mgmt(IND)Pvt Ltd
Rating
Risk Moderate
Expense Ratio 0.52
Sharpe Ratio 2.57
Information Ratio 0
Alpha Ratio 0
Min Investment 10,000
Min SIP Investment 500
Exit Load NIL
Yield to Maturity 0%
Effective Maturity 1 Year 15 Days
Modified Duration

Growth of 10,000 investment over the years.

DateValue
31 Jan 18₹10,000
31 Jan 19₹10,908
31 Jan 20₹11,418
31 Jan 21₹12,367
31 Jan 22₹13,902

Franklin India Ultra Short Bond Fund - Super Institutional Plan SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹206,148.
Net Profit of ₹26,148
Invest Now

Purchase not allowed

Returns for Franklin India Ultra Short Bond Fund - Super Institutional Plan

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 7 Aug 22

DurationReturns
1 Month 0.6%
3 Month 1.3%
6 Month 5.9%
1 Year 13.7%
3 Year 8.8%
5 Year 8.7%
10 Year
15 Year
Since launch 8.9%
Historical performance (Yearly) on absolute basis
YearReturns
2022
2021 11.9%
2020 4%
2019 9.6%
2018 8.7%
2017 8.2%
2016 9.7%
2015 9.7%
2014 10%
2013 10%
Fund Manager information for Franklin India Ultra Short Bond Fund - Super Institutional Plan
NameSinceTenure
Santosh Kamath25 Oct 184.19 Yr.
Pallab Roy1 Jun 0814.59 Yr.

Data below for Franklin India Ultra Short Bond Fund - Super Institutional Plan as on 31 Jul 22

Asset Allocation
Asset ClassValue
Cash100%
Debt Sector Allocation
SectorValue
Cash Equivalent100%
Credit Quality
RatingValue
A100%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
SBI Overnight Fund Dir Gr
Investment Fund | -
100%₹297 Cr846,073
↓ -64
Call, Cash & Other Assets
Net Current Assets | -
0%₹0 Cr

2. Aditya Birla Sun Life Savings Fund

The primary objective of the schemes is to generate regular income through investments in debt and money market instruments. Income maybe generated through the receipt of coupon payments or the purchase and sale of securities in the underlying portfolio. The schemes will under normal market conditions, invest its net assets in fixed income securities, money market instruments, cash and cash equivalents.

Aditya Birla Sun Life Savings Fund is a Debt - Ultrashort Bond fund was launched on 16 Apr 03. It is a fund with Moderately Low risk and has given a CAGR/Annualized return of 7.4% since its launch.  Ranked 6 in Ultrashort Bond category.  Return for 2022 was 4.8% , 2021 was 3.9% and 2020 was 7% .

Below is the key information for Aditya Birla Sun Life Savings Fund

Aditya Birla Sun Life Savings Fund
Growth
Launch Date 16 Apr 03
NAV (03 Feb 23) ₹458.975 ↑ 0.09   (0.02 %)
Net Assets (Cr) ₹14,948 on 31 Dec 22
Category Debt - Ultrashort Bond
AMC Birla Sun Life Asset Management Co Ltd
Rating
Risk Moderately Low
Expense Ratio 0.49
Sharpe Ratio -0.52
Information Ratio 0
Alpha Ratio 0
Min Investment 1,000
Min SIP Investment 1,000
Exit Load NIL
Yield to Maturity 7.4%
Effective Maturity 6 Months 4 Days
Modified Duration 5 Months 19 Days

Growth of 10,000 investment over the years.

DateValue
31 Jan 18₹10,000
31 Jan 19₹10,793
31 Jan 20₹11,684
31 Jan 21₹12,447
31 Jan 22₹12,963
31 Jan 23₹13,602

Aditya Birla Sun Life Savings Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹200,132.
Net Profit of ₹20,132
Invest Now

Returns for Aditya Birla Sun Life Savings Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 7 Aug 22

DurationReturns
1 Month 0.5%
3 Month 1.7%
6 Month 2.9%
1 Year 5%
3 Year 5.2%
5 Year 6.4%
10 Year
15 Year
Since launch 7.4%
Historical performance (Yearly) on absolute basis
YearReturns
2022 4.8%
2021 3.9%
2020 7%
2019 8.5%
2018 7.6%
2017 7.2%
2016 9.2%
2015 8.9%
2014 9.7%
2013 9.5%
Fund Manager information for Aditya Birla Sun Life Savings Fund
NameSinceTenure
Sunaina Cunha14 Jun 148.56 Yr.
Kaustubh Gupta15 Jul 1111.47 Yr.
Monika Gandhi22 Mar 211.78 Yr.

Data below for Aditya Birla Sun Life Savings Fund as on 31 Dec 22

Asset Allocation
Asset ClassValue
Cash60.09%
Debt39.91%
Debt Sector Allocation
SectorValue
Corporate50.04%
Cash Equivalent29.26%
Government20.7%
Credit Quality
RatingValue
AA20.68%
AAA79.32%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
Housing Development Finance Corporation Ltd
Debentures | -
4%₹597 Cr6,000
182 DTB 29062023
Sovereign Bonds | -
3%₹413 Cr42,504,130
Bharti Telecom Limited
Debentures | -
2%₹324 Cr3,250
Shriram Finance Limited
Debentures | -
2%₹277 Cr2,750
Reliance Industries Limited
Debentures | -
2%₹253 Cr2,500
Cholamandalam Investment And Fin. Co. Ltd
Debentures | -
2%₹249 Cr2,500
08.54 MH Sdl 2023
Sovereign Bonds | -
2%₹246 Cr24,500,000
Housing Development Finance Corporation Ltd
Debentures | -
2%₹244 Cr2,450
08.21 HR UDAY 2023
Domestic Bonds | -
2%₹236 Cr23,500,000
08.39 RJ UDAY 2023
Domestic Bonds | -
1%₹215 Cr21,477,000

3. IDBI Ultra Short Term Fund

The objective of the Scheme will be to provide investors with regular income for their investment by investing in debt and money market instruments with relatively lower interest rate risk, such that the Macaulay duration of the portfolio is maintained between 3 months to 6 months. However, there can be no assurance that the investment objective of the Scheme will be realized.

IDBI Ultra Short Term Fund is a Debt - Ultrashort Bond fund was launched on 3 Sep 10. It is a fund with Moderately Low risk and has given a CAGR/Annualized return of 7.1% since its launch.  Ranked 78 in Ultrashort Bond category.  Return for 2022 was 4.5% , 2021 was 3.9% and 2020 was 5.1% .

Below is the key information for IDBI Ultra Short Term Fund

IDBI Ultra Short Term Fund
Growth
Launch Date 3 Sep 10
NAV (03 Feb 23) ₹2,348.76 ↑ 0.57   (0.02 %)
Net Assets (Cr) ₹205 on 31 Dec 22
Category Debt - Ultrashort Bond
AMC IDBI Asset Management Limited
Rating
Risk Moderately Low
Expense Ratio 0.6
Sharpe Ratio -1.62
Information Ratio 0
Alpha Ratio 0
Min Investment 5,000
Min SIP Investment 500
Exit Load NIL
Yield to Maturity 6.89%
Effective Maturity 5 Months 9 Days
Modified Duration 4 Months 14 Days

Growth of 10,000 investment over the years.

DateValue
31 Jan 18₹10,000
31 Jan 19₹10,704
31 Jan 20₹11,432
31 Jan 21₹11,992
31 Jan 22₹12,460
31 Jan 23₹13,054

IDBI Ultra Short Term Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹197,169.
Net Profit of ₹17,169
Invest Now

Returns for IDBI Ultra Short Term Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 7 Aug 22

DurationReturns
1 Month 0.5%
3 Month 1.6%
6 Month 3%
1 Year 4.8%
3 Year 4.5%
5 Year 5.5%
10 Year
15 Year
Since launch 7.1%
Historical performance (Yearly) on absolute basis
YearReturns
2022 4.5%
2021 3.9%
2020 5.1%
2019 6.9%
2018 6.9%
2017 5.8%
2016 7.9%
2015 7.8%
2014 8.7%
2013 9.2%
Fund Manager information for IDBI Ultra Short Term Fund
NameSinceTenure
Raju Sharma7 Sep 220.32 Yr.

Data below for IDBI Ultra Short Term Fund as on 31 Dec 22

Asset Allocation
Asset ClassValue
Cash79.15%
Debt20.85%
Debt Sector Allocation
SectorValue
Cash Equivalent48.3%
Government33.08%
Corporate18.62%
Credit Quality
RatingValue
AA11.13%
AAA88.87%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
364 DTB 12102023
Sovereign Bonds | -
11%₹24 Cr2,500,000
Steel Authority Of India Limited
Debentures | -
3%₹5 Cr520,000
Godrej Properties Limited
Debentures | -
2%₹5 Cr500,000
Chennai Petroleum Corporation Ltd.
Debentures | -
2%₹4 Cr380,000
Udaipur Cement Wor
Debentures | -
1%₹2 Cr250,000
JSW Steel Limited
Debentures | -
1%₹2 Cr150,000
TATA Motors Limited
Debentures | -
1%₹1 Cr150,000
Piramal Capital & Housing Finance Limited
Debentures | -
0%₹1 Cr105,700
Treps
CBLO/Reverse Repo | -
38%₹81 Cr
State Bank Of India
Certificate of Deposit | -
10%₹21 Cr2,200,000

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Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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